Executive Summary

Energy policy is what systems scientists literally call a “mess”: a tangle of economic,
environmental, social, and technical problems stirred by competing and often conflicting
political agendas.

Breakthrough Institute founders Ted Nordhaus and Michael Shellenberger have promoted
the case for a fundamental shift in energy policy strategies—away from schemes to
make dirty energy more expensive and instead a strategy to make clean energy cheap.
What they call an “emerging consensus” of analysts and centers agrees that a greatly
increased investment in breakthrough technology innovation is essential to resolving
the mess of energy-related economic, climate, and other problems.

However, a number of complex issues make it more difficult to devise how the grand
technology initiative is to be carried out, by whom, and with what results:

It is not clear how much public investment is needed.

Some debate whether a technology-first strategy is sufficient.

Innovation requires more than just R&D investment.

There are many social and political limits to how effectively technical fixes can
be created and implemented—including corruption, special interest lobbying, and rebound
effects.

Monetary factors—price, purchasing power, financing, and volatility—powerfully affect
the pace and form of innovations.

Concepts of the relative roles of government versus the private sector in fomenting
innovation are diverse and sometimes conflicting.

Allocating resources among a diverse portfolio of energy technology opportunities
is ultimately subjective and prone to biased influences.

The wish for stable policies will continually be disappointed.

Moreover, in the current economic environment, financially distressed governments
simply may not be able to provide the scale of investment called for. However, a
Plan B strategy for “innovation on a budget” is possible.

Plan B begins with the recognition that a “big” energy innovation program does not
necessarily need to be big in cost to the public treasury to be big in the scope
of its reach, engagement, diversity, and impacts.

Rather, a number of limited-budget, efficient measures to promote significant innovation
are available:

The Information Technology and Innovation Foundation has suggested ten types of low-cost
tactical measures that governments with limited budgets still may use to encourage
the kind of energy technology innovations the emerging consensus is calling for,
including: targeting procurement, restructuring tax policies, revising regulations,
and using information.

In-Q-Tel—a private, nonprofit corporation launched by the U.S. Central Intelligence
Agency in 2000 with the explicit mission of accelerating the development of information
technology innovations—is an example of how government can use modest resources to
leverage big innovation results.

Historically, foundations and other private philanthropists have nurtured major,
even world-changing breakthroughs in science and technology—including the polio vaccine
and the “Green Revolution” in agriculture.

Several emerging-consensus collaborators agree that the organization of a breakthrough
energy innovation program requires greater decentralization, regionalization, diversification,
and broader overall participation than traditional centralized government technology
projects. The “mesh” architecture of modern information technology points the way.

An indicator of what a socially and digitally networked energy-innovation mesh may
accomplish is the open-source IT movement that begat products such as the Linux operating
system, the World Wide Web, Wikipedia, and such. In fact leading-edge corporations
now are using social networks to open up their innovation efforts to broad participation,
demonstrating the potential of “Open Innovation.”

The energy innovation programs the emerging consensus is calling for should defocus
activity to many diverse nodes at the edge, and nurture bottom-up innovation. And
they should engage collaboration internationally, not just domestically.

Such a network-oriented program design can achieve broad and diverse participation
more effectively and at lower cost than the traditional form of centralized, top-down,
hub-and-spoke national programs. The open innovation mesh is the key to untangle
the energy policy mess.